Peninsular Park Sdn Bhd v 1. Ai-Af Holdings Sdn Bhd (24NCC-48-05/2014)

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WONG JUAT BOEY YIKE CHEE WAH …PENCELAH-PENCELAH YANG DICADANGKAN GROUNDS OF JUDGMENT (ENCLOSURE 3) [1] Enclosure 3 is an application filed by twenty five (25) parties comprised of one company by the name of Al-Af Holdings and 24 individuals. Through Enclosure 3, the 25 parties (hereinafter referred to as “the proposed interveners”) sought leave from this Court to intervene in the Ex Parte Originating Summons (Enclosure 1) initiated by the Applicant {Peninsular Park Sdn Bhd (In liquidation)}. In addition to seeking leave to intervene, the proposed interveners also applied for leave to be added as Respondents/ Defendants in the Applicant’s proceeding. Enclosure 3 was filed by the proposed interveners pursuant to Order 15 Rule 6, of the Rules of Court 2012 (ROC). 3 [2] The proposed Interveners’ grounds in filing the Enclosure 3 is essentially that being purchasers of units/plots of the Legend Farmstead, they are named/listed as creditors in the Scheme of Arrangement (“SOA”) and therefore they have a direct interest in the (SOA) that the Applicant seeks vide Enclosure 1. Enclosure 1 is filed pursuant to section 176(3) of the Companies Act 1965. [3] At this juncture, for better understanding of the case, it is only appropriate for this Court to set out the brief background facts that give rise to the proposed interveners’ application.

3.1 The Applicant was wound up by the High Court of Malaya Kuala Lumpur on 10/2/2011. On 16/8/2011, by the order of the High Court of Malaya at Kuala Lumpur, one Chong Chuan Long was appointed the Liquidator of the Applicant.

3.2 At all material times, the Applicant is the registered owner of 2 parcels of land held under Grant No. 39220 and 39221, Lot No. 2496 and 2565, Mukim Batang Kali, Daerah Ulu Selangor, Negeri Selangor (the said lands).

3.3 In April 1993, the Applicant commenced a development project on the said 2 parcels of land and the development project is known 4 as “the Legend Farmstead.” However, the Legend Farmstead’s project could not be completed.

3.4 The Proposed Interveners are among the purchasers of housing lots in the failed Legend Farmstead project.

3.5 The said Lands were charged to Alliance Bank Bhd and to Sinesinga Sdn Bhd as the 1st and 2nd chargees respectively.

3.6 On or about 18/6/2012, the Applicant received an offer from Hana Bestari Sdn Bhd (HBSB) to settle the outstanding sum due to the chargees of approximately RM72,000,000.00 in total (the outstanding sum) and upon settlement of the outstanding sum, HBSB shall procure a “White Knight” to undertake the debt restructuring of the company under the terms of the Scheme of Arrangement (the SOA) as stipulated in the Explanatory Statement to free the Land from the claims and/or interest of the Purchasers.

3.7 The Applicant had on 20/6/2012 accepted HBSB’s offer. According to the Applicant, the primary reason for accepting the offer was that the Purchasers would see a return under the SOA as opposed to no returns in the event of foreclosure and after settlement of the outstanding sum. 5

3.8 On 21/6/2012 and 18/9/2013, HBSB fully settled the outstanding sum to Sinesinga and to Alliance respectively. The said lands were redeemed and are now free from any charge.

3.9 The Applicant vide an Originating Summons No. 24-1282-09/2013 which was filed in the High Court of Malaya at Shah Alam, on 17/9/2013 had obtained an Order to convene a meeting of the Scheme Creditors (the CCM) under Section 176 (1) of the Companies Act 1965 ( the Act). The meeting was held on 13/12/2013 in which the Applicant claims that the Scheme secured the majority required under Section 176 (3) of the Act.

3.10 The terms of the SOA are contained in the Explanatory Statement (ES) issued under Section 177 of the Act. On 13/12/2013, the CCM was convened. (The ES was previously circulated to the Purchasers (“the Scheme Creditors”). The CCM proceeded to vote by way of poll.

3.11 The results of the CCM were as follows: a) 79 votes casted in favour of the SOA representing 75.96% in number and RM8,085,594.16 (or 82.13%) in value; b) 25 votes against the SOA representing 24.04% in number and RM1,759,808.77 ( 17.87%) in value. 6

3.12 The SOA was approved with the requisite majority of more than 50% in number and 75% in value of the Scheme Creditors present and voting at the CCM.

3.13 Thereafter, pursuant to Section 176 (3) of the Act, the Applicant in seeking sanction of the SOA filed Enclosure 1 for inter alia the following orders: i. The scheme of Arrangement as set out in the Explanatory Statement as exhibited in the Affidavit affirmed by Chong Chuan Long on 28.5.2014 and marked herein as Schedule “A” which has been circulated to the Purchasers (“the Scheme Creditors”) as set out in the Explanatory Statement, be hereby approved by this Honourable Court and shall be binding on the Scheme Creditors pursuant to Section 176(3) Companies Act, 1965; ii. That pursuant to Order 62 of the Rules of Court 2012, the Applicant may serve a photocopy of the Order herein upon the Scheme Creditors by way of pre-paid registered post addressed to their last known address and in the event such persons are incorporated bodies, upon such incorporated bodies and their directors and/or officers, by way of pre-paid registered post or by courier addressed to the head or principal office of such persons or by advertising the same once in Bahasa Malaysia in the Berita Harian or Utusan Malaysia and once in the English Language in the News Straits Times or the Star newspaper within 14 days from the date of the Order and such service of the Order herein; 7 iii. That an office copy of the Order herein be lodged with the Companies Commission of Malaysia within 14 days from the date of the Order; iv. That all private caveats entered on the land known as Geran Nos. 39220 and 39221, Lot Nos.2496 and 2595, Mukim Batang Kali, Daerah Ulu Selangor, Negeri Selangor (“the said Land”) shall be removed within 7 days from the date of service of the Order on the Registrar of Title; [4] In their affidavits in support of Enclosure 3, the proposed interveners have objected to sanction or approval being granted to the SOA by the Court and raised various objections. They alleged that there are irregularities in the execution of the scheme creditors’ meeting

and irregularities in the counting/calculation of votes in which they claimed that the majority support of the SOA required under section 176(3) of the Act was actually not achieved. [5] The proposed interveners also opposed the SOA and objected to any sanction given to the SOA on the ground that if the scheme is approved, the proposed interveners being purchasers of lots via Sale and Purchase agreements with the Applicant are creditors of 8 the Applicant, will be directly affected by the SOA in the following manner:

the SOA will be binding on them.

(ii) they will only be entitled to 10% of the purchase consideration that they have paid to the company for their lots;

(iii) they will lose all their contractual/other existing rights against the Applicant; and

(iv) any caveats on the land that have been entered by them will then be removed. [6] It is the proposed interveners’ stance that they are forced to file Enclosure 3 to challenge the validity of the vote/scheme meeting, to defend their legal right and to prevent their caveats on the lands from being removed. [7] Before this Court considers whether the proposed interveners ought to be granted leave to intervene or ought to be given leave to be added as Respondents/Defendants in the Applicant’s proceeding pursuant to Order 15 Rule 6 of the ROC and whether there are any merits in the proposed interveners’ application it would be useful for this Court to briefly summarise the legal principles on intervention and joinder of parties. The law on intervention or joinder of parties is trite and well settled. The 9 granting of leave to intervene or leave to be made a party in a proceeding is a discretionary one. Generally, the court will grant an applicant leave to intervene if he can show that he has an interest directly related to the action. However, authorities have established that the interest the applicant must have or possess means a legal interest not a mere commercial interest. [8] Kerr LJ in the case of Sanders Lead Co Inc v Entores Metal Brokers Ltd [1984] 1 WLR 452, in expressing his view on the meaning of interest required for purposes of intervention had said at page 460 as follows: “In my view, the rule requires some interest in the would-be intervener which is in some way directly related to the subject matter of the action. A mere commercial interest in its outcome, divorced from the subject matter of the action, is not enough.” [9] The principle enunciated by the Court of Appeal in the case of Sanders Lead have been applied in a number of Malaysian cases. (See: i. Tohtonku Sdn Bhd v Superace M) Sdn Bhd [1989] 2 MLJ 298 ii. Lee Meow Lim v Lee Meow Nyin (t/a Cheong Fatt 10 Merchant) iii. Nabisco Brands (M) Sdn Bhd, Intervener [1990] 3 MLJ 123). [10] In the case of Tohtonku Sdn Bhd v Superace (M) Sdn Bhd

2 MLJ 63, the Supreme Court in dismissing an appeal against the order of the High Court allowing applicant’s application to intervene in the proceeding before it, held inter alia as follows: “In determining whether a party may be added as an intervener, the test is if his 'legal interests', ie his rights against or liabilities to any party to the action in respect of the subject matter of the action would be directly affected by any order or judgment which might be made in the action. Applying the test the answer to the question was definitely in the affirmative where the respondent was concerned and therefore the High Court was correct in its decision allowing the respondent to intervene in these proceedings.” (emphasis added) [11] Order 15 Rule 6 of the ROC provides the following: Misjoinder and non-joinder of parties (O. 15, r. 16)

A cause or matter shall not be defeated by reason of the misjoinder or non-joinder of any party, and the Court may in any 11 cause or matter determine the issues or questions in dispute so far as they affect the rights and interests of the persons who are parties to the cause or matter.

Subject to this rule, at any stage of the proceedings in any case or matter, the Court may on such terms as it thinks just and either of its own motion or on application-

order any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party;

order any of the following persons to be added as a party, namely-

any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon; or

(ii) any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which, in the opinion of the Court, would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.

An application by any person for an order under paragraph (2) adding him as a party shall, except with the leave of the Court, be 12 supported by an affidavit showing his interest in the matters in dispute in the cause or matter or, as the case may be, the question or issue to be determined as between him and any party to the cause or matter.

A person shall not be added as a plaintiff without his consent signified in writing or in such other manner as may be authorized. [12] The relevant provision on which the proposed interveners’ application hinges upon is Order 15 r. 6(2)(b) of the ROC. In summary, Order 15 r. 6(2)(b) provides that a person may be added as a party on the following instances:

When that person should be heard and “ought to have been joined as a party”;

When that person’s “presence before the Court is necessary to ensure that all matters in dispute...may be effectually and completely determined and adjudicated upon”; or

Where it would be just and convenient for the Court to determine the questions and issues between the person and a party relating to the relief claimed by the party. 13 [13] Lord Diplock in delivering the judgment of the Privy Council in the case of Pegang Mining Co Ltd v Choong Sam Ors (1969) 2 MLJ 52 in affirming the decision of the Federal Court in allowing the application of the first respondent for leave to substitute his name in place of the appellant in the appeal, formulated an approach for the Court to consider when exercising its discretionary power under Order 16 rule 11 of the Rules of Supreme Court (R.S.C)

Lord Diplock’s approach is as follows: “….. one of the principal objects of the rule is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard.” [14] Lord Diplock went further and said: It has been sometimes said as in Moser v Marsden and in In re I.G. Farbenindustrie A.G. that a party may be added if his legal interests will be affected by the judgment in the action but not if his commercial interests only would be affected. While their Lordships agree that the mere fact that a person is likely to be better off financially if a case is decided one way rather than 14 another is not a sufficient ground to entitle him to be added as a party, they do not find the dichotomy between 'legal' and 'commercial' interests helpful. A better way of expressing the test is. will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?” [15] The approach formulated by Lord Diplock in Pegang Mining has been adopted in numerous local decisions. (See: Eh Riyid v Eh the [1976] 1 MLJ 26 Arab; Malaysian Merchant Bank Bhd v Dr Jamaludin Dato’ Mohd Jarjis [1991] 2 MLJ 27, SC; Ingeback (Malaysia) Sdn Bhd v East West-UMI Insurance Berhad & Ors [1994] 2 CLJ 387, HC; Tsoi Ping Kwan v Medan Juta Sdn Bhd & Ors [1996] 3 AMR 3591; [1996] 4 CLJ 553; [1996] 3 MLJ 367, CA, at 380; Soo Hong & Leong Kew Moi v United Malayan Banking Corp Bhd & Anor [1997] 1 MLJ 690, CA; Takang Timber Sdn Bhd v Government of Sarawak & Anor [1998] 4 MLJ 42, CA) [16] Thus from the numerous authorities cited above, it is patently clear that for this Court to allow the proposed interveners to intervene or to be added as a party, the proposed interveners must show to this Court that from the circumstances of the matter, the proposed 15 interveners have legal interest A mere commercial interest in the outcome of the matter before this Court does not justify intervention or joinder as a party. [17] The proposed interveners’ application is strenuously objected to by the Applicant and it was argued on behalf of the Applicant that the proposed interveners have no right to intervene in the Applicant’s application for the Court’s sanction on two grounds, namely:

the proposed interveners have no locus standi to intervene

(ii) the proposed interveners’ application is without merits.

the proposed interveners have no locus standi to intervene [18] It was submitted on behalf of the Applicant that the law is trite that under Section 176(1) of the Act, the Applicant may enter into a compromise of arrangement between its creditors or a class of creditors. According to the Applicant, in this case the Applicant chose to enter into the SOA with its creditors namely the Scheme Creditors. Following this option, the SOA was put up and an application was then made to the High Court pursuant to section 16 176(1) for a Court order to convene a meeting with the Scheme Creditors. The Court on 17.9.2013 granted an Order for the Applicant to convene a meeting with the Scheme Creditors. It was submitted by counsel for the Applicant that under the proposed SOA, the Scheme Creditors are defined as “the purchasers who have entered into sale and purchase agreements with the Company (the Applicant herein) to purchase lots under the Project namely the Legend Farmstead” (in which the proposed interveners are not). [19] It was argued by the Applicant, from the outset the proposed interveners nos. 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 17, 18, 19, 20 and 21 were eighteen proposed interveners who are not within the definition of Scheme Creditors as their Sale and Purchase Agreements have been validly terminated. It is the contention of the Applicant in its Affidavit in Reply (II) that the SPA’s of the eighteen proposed interveners have been validly terminated. This averment was not rebutted or denied by the eighteen proposed interveners. They also did not challenge the validity of the termination. 17 [20] Hence, it was submitted by the Applicant that since the eighteen proposed interveners had not rebutted or denied this averment in their affidavit, nor have they commenced any action against the Applicant in respect the termination, therefore they are deemed to have accepted the termination of their SPA’s. [21] Counsel for the Applicant further submitted that since the Scheme Creditors do not include the purchasers who had their respective SPA’s validly terminated, the eighteen proposed interveners no longer have any legal interest in the matter before this Court, and thus they lack any locus standi to intervene in the Applicant’s proceeding. [22] In respect of the 22nd and the 24th proposed interveners, Azizi Bin Yom Ahmad and Nik Azlan bin Nik A Kadir, it was submitted on behalf of the Applicant that although both the 22nd and the 24th proposed interveners had valid and subsisting SPA’s, however both of them had failed to attend the CCM without providing any valid reason. As such they have on their own accord failed to exercise their rights. According to the Applicant, failure in attending the CCM without proper valid reasons constitutes a waiver of their legal rights. 18 [23] It is also the argument of the Applicant that the reasons stated by the proposed interveners cannot per se constitute grounds for intervention as the Applicant’s proceeding before this Court is pursuant to section 176 of the Act and there are salient points in the Scheme itself which has been formulated as per the terms of the SOA. It was further submitted by the Applicant that the Applicant is at liberty to enter into the SOA with its class of creditors, and here the class of creditors must be purchasers with a subsisting and valid SPA. [24] The proposed interveners on the contrary submitted that all the interveners have the requisite legal interests notwithstanding whether their contracts or SPA’s were terminated or if there was non-attendance at the CCM or whether they were disallowed from voting. It was further submitted that the attendance of the interveners in the CCM is irrelevant because a Scheme Creditor who did not attend or vote is still entitled to demand that the Scheme Creditors Meeting is carried out according to the law and that the mandatory statutory majority is achieved since they will be bound by the SOA when sanction or approval is granted by the Court. The Applicant / Scheme Proposer according to the 19 proposed interveners has no right to bind the proposed interveners regardless of whether they attended the CCM or not, until and unless the Scheme satisfies all the legal requirements. [25] It was argued for the proposed interveners whose contracts were terminated that they still have a legal interest in the Applicant’s proceeding as the Scheme affects their legal rights even though they were not allowed to take part in the Scheme Meeting. Further, according to the proposed interveners, the purported termination of an intervener’s contract or SPA does not prevent the interveners from having a legal interest. The legality of the termination is an issue/question arising out of; relating to; and connected with the relief claimed by the company and therefore pursuant to Order 15 Rule 6 (b) (ii), the proposed interveners must be given leave if the Court is of the opinion that it is just and convenient to determine such issue. [26] It was further argued by the proposed interveners that the Applicant has not denied that all the proposed interveners will be legally bound by the sanction order. Upon sanction granted to the SOA, the proposed interveners’ contractual rights will be extinguished. The proposed interveners whose contract were 20 terminated will still be bound by the Scheme and the company debt to all the interveners will be cut to 10% of the amount due and owing. The proposed Interveners find support of their arguments by relying on the Privy Council’s decision in the case of Pegang Mining Company Ltd v Choong Sam & Ors (1968) 1 LNS 96. Court’s finding on the issue of locus standi issue [27] It is clear that the Applicant’s application before this Court is filed pursuant to section 176 (1) of the Act. Section 176 of the Act generally relates to scheme of arrangements and compositions proposed by ailing companies or companies which had gone into liquidation and its creditors or any class of creditors or between the company and its members or any class of them. It is a clear law that section 176 provides a machinery for companies and its creditors or between the company and its members or any class of them to come up or put up a scheme of compromise or arrangement between themselves. Section 176 of the Act is equivalent to section 120 of the English’s Companies (Consolidation) Act 1908. The scope of section 120 of the Companies (Consolidation) Act 1908 has been explained by Younger J in an English case of Re Guardian Assurance 21 Company [1917] 1 Ch 431. Younger J in construing section 120 said at page 441 as follows: “Its purpose is strictly limited: it does not confer powers; its only effect at any time is to supply, by recourse to the procedure thereby prescribed, the absence of the individual agreement by every member of the class to be bound by the scheme which would otherwise be necessary to give it validity.” [28] In other words, section 176 only confers a mechanism that a scheme of arrangement or compromise can be put up between the parties namely the company and its creditor or any class of creditors or between the company and its members or any class of them. However, under section 176(3) of the Act, ultimately the Court is the one which has been vested with the power to approve the scheme of arrangement or compromise. In the present case, the Applicant has chosen to enter into the SOA with a class of creditors namely the Scheme Creditors. It is not in dispute that the Scheme Creditors in the proposed SOA are defined as Purchasers who have entered into sale and purchase agreements with the company to purchase lots under the Legend Farmstead project. 22 [29] The Applicant had averred in paragraph 7,8 and 9 of its Affidavit In Reply affirmed by Chong Chuan Long (Liquidator) on 2 September 2014 and paragraph 7 of the Affidavit In Reply (II) by the same Chong Chuan Long affirmed on 30 September 2014 that the SPA of the eighteen proposed interveners have been terminated. [30] For ease of reference, the relevant paragraphs are reproduced below:

Paragraphs 7, 8 and 9 of Affidavit In Reply affirmed by

As a starting point, I state that only 8 out of the 25 Proposed Interveners were allowed to vote during the Court Convened Meeting held on 13.12.2013 (“the said Meeting”). I state this in reliance to Exhibit 3 of the Proposed Interveners Affidavits in Support. However, only 6 out of the 8 eligible to vote had attended in person or by way of their proxy and had voted against the SOA during the said Meeting. I state this in reliance to the List of Attendees of the said Meeting. 23 Now shown and produced to me is a copy of the List of Attendees of the said Meeting and marked as Exhibit “CCL- 6”.

I state that the reminder of the Proposed Interveners were not entitled to vote to approve the said SOA during the said Meeting as their Sale and Purchase Agreements (“SOA”) had been terminated. I have been advised by the Applicant’s solicitors and verily believe that the termination of the Proposed Interveners’ SPAs were justified as there was an express term provided in the SPAs that the Applicant is entitled to terminate the same in the event a private caveat was lodged by any purchasers without the prior written consent of the Applicant.

In any event, I state that prior to the termination of the Proposed Interveners’ SPAs, I had instructed my solicitors to issue a Notice dated 25.11.2013 to the relevant Proposed Interveners to among other remove their private caveats which were entered on their respective lots on the said Land in the said Project by 1.12.2013 failing which their SPAs will be terminated effective 2.12.2013 without further notice. 24 Now shown and produced to me are copies of the Notices dated 25.11.2013 to some of the Proposed Interveners and marked collectively as Exhibit “CCL-7”

Paragraph 7 of Affidavit In Reply II affirmed by Chong Chuan

With regard to paragraph 7 of the Proposed Interveners’ Affidavit in Reply, I am advised by the Applicant’s solicitor s and verily believe that just because an explanation can be given as to why the Proposed Interveners committed a breach of the SPA does not render the breach proper. I am further advised by the Applicant’s solicitors and verily believe that the Proposed Interveners’ action in failing to remove the private caveats remains a breach and therefore entitled me to terminate the SPAs. I also state that the Proposed Interveners did not dispute that they have breached the SPAs. [31] These averments were never rebutted and/or denied by the eighteen proposed interveners. They also did not challenge the validity of the termination by the Applicant in any other action. In this instance, this Court fully agrees with the Applicant that the eighteen proposed interveners were initially purchasers who had 25 entered into sale and purchase agreements to purchase units in the Legend Farmstead and had paid 10% deposit of the units. However, when the SPA’s of these eighteen proposed interveners were validly terminated, they can no longer claim that they are still the purchasers of units who had entered the SPA with the Applicant. The effect of the valid termination of their SPA’s by the Applicant is that the eighteen proposed interveners ceased from being purchasers who have entered into sale and purchase agreements with the Applicant. They lost their stand as purchasers with subsisting SPA’s and therefore they cannot be a part of the Scheme Creditors defined in the SOA. When they do not come within the definition of Scheme Creditors, the eighteen proposed interveners do not have the requisite legal right or interest to intervene or to be joined as parties in the Applicant’s proceeding. [32] This Court must emphasise here that under section 176 of the Act, the Applicant is at liberty to enter into the scheme of arrangement or compromise with its creditor or class of creditors. Here, the crucial terms of the SOA, the class of creditors are purchasers with subsisting and valid SPA. 26 [33] While in the case of the 22nd and the 24th proposed interveners, this Court is in full agreement with the Applicant that even though the two proposed interveners had valid and subsisting SPA’s, but on the day of the CCM was held they failed to attend the CCM without providing any valid reason, thus the 22nd and 24th proposed interveners had failed to exercise the rights at the CCM. They are deemed to have waived their rights and cannot now say that their legal rights are affected and they are not entitled to raise an objection in this Applicant’s proceeding. [34] The 22nd and 24th proposed interveners’ position has been aptly described in the case of Capital Dynasty Sdn Bhd (in liquidation) v Chiang Bing & Ors (2009) 8 MLJ 841. Ramly Ali J (as he then was) at page 854 of his judgment has this to say: “The respondents had waived their rights to raise the second objection against the secured creditor as they had themselves failed to attend the meeting and to exercise their voting rights having been given notice of the meeting and filing their proof of debt. In fact, a majority of them did not object when the scheme papers were served on them. As such, by their conduct, they were deemed to have waived their rights to now object to the SOA being sanctioned by the Court.” (emphasis added) 27 [35] With regards to the other five (5) proposed interveners, they were included as Scheme Creditors and had attended the CCM. They even had exercised their right as Scheme Creditors and voted against the Scheme. It is to be noted that the five of them makes up the minority interest. Having exercised their rights and had voted not in favour of the SOA and representing minority interest, the five interveners cannot now say that they have the requisite legal interest to challenge the Applicant’s proceeding for the second time. [36] In the case of Capital Dynasty, Ramly Ali, J has also stated at paragraph 27 that: “… the court finds that objection (a) is not a justifiable basis for this court to refuse to sanction the SOA and even if this court finds merit in objection (a), the interests of other Scheme Creditors who supported the Scheme and met the statutory approval (ie the majority in number and 75% in value) override the interests of the interveners who constitute the minority.” [37] This Court also agrees with the Applicant’s submission that the other basis of the intervention which have been raised by the 28 proposed interveners cannot per se constitute grounds for intervention.

(ii) the proposed interveners’ application is without merits. [38] With regards to the allegation of irregularities and non-compliances, the proposed interveners raised the following issues:

the Explanatory Statements (ES) lacks particulars in which the proposed interveners claimed should be provided to them

there were “material non-compliance of procedural and statutory requirements”;

there was “overcounting” of votes.

whether the scheme can be “sanctioned” when those who caveated the land were prevented from voting at the CCM and yet, are still bound by the Scheme. [39] The Applicant submitted that the proposed interveners’ allegations are baseless, vexatious, lack of particulars and has no merits. 29

the Explanatory Statements (ES) lacks particulars in which the proposed interveners claimed should be provided to them [40] Having examined the particulars in which the proposed interveners claim to be lacking in the ES, this Court entirely agrees with the Applicant that all the particulars allegedly lacking are irrelevant. It is not in dispute that the amount owing to the chargees is RM72 million in total. It is also not in dispute that the reserve price for the auction of the said lands was set at RM28 million. By this calculation, it is evident that in the event of a liquidation scenario, the proposed interveners would not be able to recover any monies at all. However, under the SOA, the Scheme Creditors’ are not affected but are better and improved. The salient features of the SOA are as follows:

The Company will offer to pay to each of the Scheme Creditors a sum representing ten percent (10%) of the purchase consideration paid by the Scheme Creditors pursuant to the sale and purchase agreements entered to the Company as full and final settlement for any outstanding sum owing to Purchaser pursuant to the SPA (“Settlement Sum”) subject to the SPA being valid. For the purpose of computing the Settlement Sum payable to each 30 Scheme Creditors, the Settlement Sum will be rounded down to the nearest whole sen and the Company and/or Liquidator shall at its sole discretion to disregard any fraction of a sen.

In the even that the SPA has been terminated for whatever reason, any amount remaining due and payable to the Purchaser shall be paid at the rate of 10% of the said sum.

The payment of the Settlement Sum shall be made by the Company to the Scheme Creditors within thirty (30) days from the Company receiving the sealed order of the High Court of Malaya approving the Proposed Scheme of Arrangement. [41] Under these terms, the Purchasers would see a return as opposed to no return in the event of foreclosure and after settlement of the outstanding sum of RM72,000,000.00.

there were “material non-compliance of procedural and statutory requirements”; [42] The proposed interveners alleged that there were material non-compliance of procedural and statutory requirements. However, 31 the proposed interveners did not specify in their affidavits what are the procedural or statutory requirements that the Applicant had failed to adhere to. Without setting out the particulars of non-compliances, this Court opines the allegations are bare allegations, not supported or substantiated by any form of documentary evidence or proof.

Over-counting of votes [43] The proposed interveners had questioned the majority votes obtained by the Applicant in the CCM. They alleged that the majority votes obtained by the Applicant was due to the ‘over-counting’ of creditors whereby Scheme Creditors who had purchased multiple plots of land or units were counted as an individual creditor for each lot or unit. Thus, according to the proposed interveners, a company called Konsortium Enterprise Sdn Bhd who purchased 41 lots or units was counted as 41 creditors and another company, Exotic Nature Sdn Bhd, was counted as 33 creditors as it has purchased 33 lots or units. [44] With regards to this vote counting, it was contended by the Applicant that at the CCM it has been made known to Scheme 32 Creditors that counting of the votes will be based on the number of plots owned by each Scheme Creditor. This Court is in agreement with the Applicant’s argument that counting the vote in accordance to the number of plots or units purchased would be the most fair and equitable counting/calculation of votes. Counting/calculating of votes in this manner will represent or reflect the value of each creditor. If the counting votes indicated by the proposed interveners, it would be grossly unjust to purchasers who had purchased more than a plot/unit or had purchased multiple plots/units.

whether the scheme can be “sanctioned” when those who caveated the land were prevented from voting at the CCM and yet, are still bound by the Scheme. [45] It was a term in the SOA that the lands has to be transferred to the “White Knight” and thus necessitates the removal of caveats Furthermore, section 178 of the Act allows the same. [46] In the present case, the Applicant had obtained the required majority of 75.96% in number and 82.13% in value at the CCM. Out of the 25 Proposed Interveners, 5 attended the CCM and 33 voted against the Scheme and 2 did not show up. Assuming for one moment that the eighteen proposed interveners were allowed to vote at the CCM and they voted against the Scheme, there would be no difference in the outcome of the approval of the SOA as after taken into account the eighteen votes of eighteen proposed interveners, the majority of 75% in number will only be reduced to 64.75% majority in number. The Applicant will still obtained more than the required statutory minimum of 50% in number and 75% in value. Hence, on this account their rights could not have been said to have been affected. [47] For above mentioned reasons, the proposed interveners’ application in Enclosure 3 is dismissed with costs of RM5000.00 to the Applicant. t.t. ...................................................... (DATUK AZIMAH BINTI OMAR) Judicial Commissioner High Court Shah Alam Selangor Darul Ehsan Dated the 14th day of April, 2015. 34 For the Applicant - Tetuan Ong Kok Bin & Co.